Having been down 161 points before the rate news, the FTSE 100 is now off 75.56 points at 4455.17.

Not everyone is convinced by the Bank's move. Joshua Raymond, market strategist at spread betters City Index said:

"The fear is now that the situation could be much more dire than first perceived. We already know that GDP contracted last quarter at a much faster rate than was expected and today's rate cut looks to accelerate and cement this fear.

"Cutting rates is comparable to a double edged sword and the right balance must be struck between being too aggressive, which can undoubtedly exacerbate fears, or too impotent, which will disappoint. Today's action looks to be the former."

Mic Mills, senior trader at ETX Capital, said:

"This is a much bigger cut than expected, and in fact, it's being seen as a bit of a panic move. Long-term, it's the right decision and we need monetary loosening to give the economy a boost. But traders are thinking, if we've really got to cut rates to 3%, then how bad is it out there. Recessionary fears were bad before; they just got a whole lot worse."

All eyes will now be on firstly, the European Central Bank which is expected to cut its rates by 50-75 basis points later, and secondly, the US non-farm payroll figures tomorrow. The fear is these could be awful, which could send markets tumbling even further.